New orders boost KSA non-oil sector growth

Cranes unload containers in Jeddah Islamic Port. Business optimism in future output has risen markedly. (AFP)
Updated 06 November 2018
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New orders boost KSA non-oil sector growth

  • The measure of non-oil business conditions — the Emirates NBD/IHS Market Purchasing Managers Index (PMI) — rose slightly to 53.8 in October from 53.4 in September
  • A breakdown of the numbers shows that new export orders recovered in October after contracting in September, demonstrating improved external demand for Saudi non-oil goods and services

LONDON: Growth in Saudi Arabia’s private non-oil sector edged upwards in October, driven by an increase in employment and new orders, according to a survey.
The improvement suggests that any fallout from the murder of Saudi journalist Jamal Khashoggi in Istanbul last month, including the threat of sanctions by the US, has not yet dented business sentiment in the Kingdom, according to analysts.
“After all sanctions were never likely to go beyond low level asset freezes and travel bans anyway, and in any case the US has scaled down its rhetoric in recent weeks,” said Gabriella Dickens, assistant economist at Capital Economics in a research note on Nov. 5.
“Sentiment might have been supported by the announcement that public sector bonuses will be fully reinstated,” she said.
The measure of non-oil business conditions — the Emirates NBD/IHS Market Purchasing Managers Index (PMI) — rose slightly to 53.8 in October from 53.4 in September. The measure remains below the year-to-date high of 55.1 recorded in August.
Any reading below 50 indicates a contraction while anything above signifies growth.

 

A breakdown of the numbers shows that new export orders recovered in October after contracting in September, demonstrating improved external demand for Saudi non-oil goods and services, according to a note by Khatija Haque, head of MENA research at Emirates NBD.
The measure of output rose at the slowest rate since April, which suggests that the increase in orders has not yet generated growth in actual output, the note said.
The employment index rose to 51.3 in October from 50.7 in the previous month, the highest measure recorded since March.
October also saw business optimism about future output rise “markedly” with almost 50 percent of companies surveyed saying they expected their output to be higher in a year’s time, the survey found. The other half said current levels of output would likely be sustained.
This improved business sentiment could be partially put down to the price of Brent oil exceeding $80 per barrel, according to Haque.
While non-oil sector growth in the Kingdom remains slower so far this year compared to 2017, the impact will be offset by the renewed oil sector growth, said Haque.
Emirates NBD has retained its forecast of 2 percent GDP growth for 2018.
Neighboring UAE saw its PMI measure for October fall to 55.0 from 55.3 in September.
“Although this is a disappointing result, it is important to note that the headline figure remained above its long-run average,” said Dickens in a note.
Business confidence for future output rose to a record high, with close to 78 percent of those surveyed saying their output would be higher in a year’s time.
Higher oil prices coupled with an anticipated increase in government spending as the country prepares for the World Expo 2020 helped fuel the increasing optimism.
Egypt’s PMI remained below 50 which indicates a contraction in growth — slipping to 48.6 in October from 48.7 the previous month. This is the lowest reading for the year so far.
“The data suggests that private sector firms remain under pressure as Egypt’s IMF-sponsored economic reform program continues,” according to Daniel Marc Richards, MENA economist at Emirates NBD.
“That being said, the reading is still far higher than those seen at the start of the process in November 2016, and future expectations remain robust,” his research note read.

FASTFACTS

New export orders in Saudi Arabia showed signs of rebounding in October after shrinking in September.


‘Substantial progress’ made on major China trade deal that excludes US

Updated 14 November 2018
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‘Substantial progress’ made on major China trade deal that excludes US

SINGAPORE: Substantial progress has been made on hammering out a China-backed trade deal, Singapore’s leader said Wednesday, driving ahead the world’s largest commercial pact which the United States is excluded from.
World leaders gathered in the tropical city state this week for a summit where a massive Beijing-backed agreement covering half the world’s population has dominated discussions.
Diplomats have been trying to nail down details as Beijing entices its neighbors to join a commercial alliance seen as an antidote to President Donald Trump’s “America First” protectionist trade policy.
The US has imposed tariffs on roughly half of what it imports from China, prompting Beijing to retaliate with its own levies.
Beijing’s leaders have recast themselves as the defenders of global commerce — with the United States under Trump relegated to the sidelines.
China, Japan and India are among 16 Asia-Pacific countries negotiating the Regional Comprehensive Economic Partnership (RCEP).
“Substantial progress has been made this year to advance the RCEP negotiations,” Singaporean Prime Minister Lee Hsien Loong said Wednesday evening, adding talks were now “at the final stage.”
“With the strong momentum generated this year, I am pleased to note that the RCEP negotiations are poised for conclusion in 2019,” he added.
But he cautioned any further delays could risk “losing credibility” for a deal — which has already taken six years to negotiate.
This week’s meetings are the biggest in a series of annual gatherings organized by regional bloc the Association of Southeast Nations (ASEAN), and are attended by 20 leaders.
RCEP was given extra impetus after US President Donald Trump pulled the US out of the rival Trans-Pacific Partnership (TPP) in early 2017.
That deal was spearheaded by his predecessor Barack Obama and aimed to bind fast-growing Asian powers into an American-backed order to counter China.
The TPP is still alive even without Washington — and will come into effect in December — but RCEP, if realized, will be the world’s biggest trade deal.
However, the Beijing-backed pact is much less ambitious than the TPP in areas such as employment and environmental protection.
Beijing had hoped to have the meat of the deal done by the end of this year, but the timetable has now slipped to 2019.
However, this has not stopped Chinese leaders from basking in the progress already made.
During a meeting with Southeast Asia leaders, Chinese Premier Li Keqiang said he was hopeful talks would “break through the ceiling” and take regional trade “to new heights.”
Trump is not at the Singapore summit, nor will he attend a subsequent gathering of world leaders in Papua New Guinea at the end of the week, having sent Vice President Mike Pence instead.
National Security Adviser John Bolton, however, told reporters in Singapore that the president’s no-show should not be seen as a lack of commitment toward the region.
He blamed a “schedule crunch” after a particularly frenetic few weeks that included the midterm elections, attending the World War I armistice commemorations in France and preparing for the G20 in Argentina later this month.
There are still major sticking points in RCEP talks — with regional rival India particularly nervous about giving Chinese companies greater access to its markets, and wealthier nations wanting to see more progress on labor reforms.
Disagreements on intellectual property rights, goods tariffs and financial services are also on a long list of issues that still need to be concluded.
Also, the spectre of possible leadership changes with several general elections scheduled early next year — India, Thailand and Indonesia — have also complicated the timeline for a deal.
Aaron Connelly, an expert on Southeast Asian politics at the International Institute for Strategic Studies, said the fact that RCEP negotiations were not concluded at this year’s ASEAN could indicate China has some way to go to convince neighbors to sign up.
“It’s interesting that when Beijing is at its most vulnerable on trade, with US tariffs biting, they weren’t willing to concede enough to their neighbors in terms of market access to get a deal done,” he told AFP.
At the same time, trade ministers across Asia Pacific have sounded a largely positive tone this week, saying they expect the pact to be agreed sooner rather than later.
“The future lies in RCEP,” Indian trade minister Suresh Prabhu told reporters earlier in the week.